By Sinead Carew
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Shares in the No. 2 U.S. mobile provider fell slightly early on Thursday on concerns about a slowdown in wireless revenue growth, despite strong iPhone sales early in the fourth quarter.
While AT&T's wireless profit margin was better than expected, its average monthly revenue per user (ARPU) for subscribers who pay monthly bills fell short.
Stifel Nicolaus analyst Chris King said that investors will be anxious to hear whether ARPU was brought down by customers from acquired assets or from price pressure from rivals.
"If they say its a trend and they're getting competitive pressure that's not a good thing," said King, adding that AT&T's ARPU of $63.69 missed his $64.50 expectation.
Better than expected wireless profits could likely be attributed to lower smartphone sales as customers held off on buying smartphones this quarter as they waited for the new iPhone, Mizuho analyst Michael Nelson said.
AT&T activated 1 million customers of the latest Apple phone, the iPhone 4S, as of Tuesday. Orders for the device started on October 7, after the end of the third quarter.
This marked the most successful iPhone launch yet, according to AT&T, which has been heavily dependent on iPhone sales for customer additions since 2007.
AT&T, which is looking for regulatory approval to buy T-Mobile USA, was the first of the big U.S. operators to report third-quarter results. AT&T once had exclusive rights to sell iPhones, but it now shares the market with Verizon Wireless and Sprint Nextel <S.N>.
AT&T added 319,000 subscribers in the quarter, compared with the average expectation for more than 382,000 from nine analysts. Most estimates were clustered in the 300,000-400,000 range, but one analyst forecast 800,000, lifting the average. The median was 311,000.
It reported a drop in operating revenue to $31.48 billion from $31.58 billion in the year-ago quarter, and was shy of analyst expectations for revenue of $31.60 billion, according to Thomson Reuters I/B/E/S.
AT&T's profit of $3.6 billion, or 61 cents per share that was in line with Wall Street expectations. It compared with a profit of $12.32 billion or $2.07 per share in the same quarter the year before, when it had a big gain from an asset sale.
AT&T shares were down 13 cents at $28.96 in early trading on the New York Stock Exchange.
(Reporting by Sinead Carew; editing by Gerald E. McCormick and Derek Caney)